(CAMBRIDGE) November 29 — Barclays PLC said Wednesday it will consider quitting agricultural commodities trading because of the risk to its reputation. Rich Ricci, chief executive of Barclays corporate and investment bank arm, told the U.K.'s Parliamentary Commission on Banking Standards, "If I decided to stop trading soft agricultural products it is not driven by regulation. It is because it doesn't sit socially well with the large constituent of our customers."
The news follows a campaign waged by scientists to raise awareness of the role of financial speculation in driving food prices to record highs this summer, leading to unrest in Haiti and South Africa. The New England Complex Systems Institute has taken the lead in demonstrating the links from speculation and ethanol production to high food prices, and the links from food prices to the potential for unrest and revolutions — including triggering the Arab Spring.
Its researchers have based their warnings on mathematical modeling of conventional supply and demand cycles gone haywire as speculators chase and burst price bubbles — with devastating consequences for the world's poorest citizens.
Attention to the role of speculation in food prices has been fostered by Frederick Kaufman, author of the recent book Bet the Farm, and public campaigns by FoodWatch Germany and the U.K.'s World Development Movement.
"We are pleased that Barclays Bank is recognizing the damage that they are doing by encouraging speculation in food," said Yaneer Bar-Yam, NECSI president, upon hearing the news.
Barclays' Ricci told the commission that exiting agricultural commodities is currently under review. He said Barclays was presently on high alert for "reputational risk" after being fined in June for its role in rigging inter-bank interest rates.
"Over the past year," said Bar-Yam, "six banks have found the scientific evidence provided by NECSI to be compelling, demonstrating their complicity in contributing to world hunger." This includes Commerzbank, Germany's second largest, which halted agricultural commodity trading in August.
Barclays is among the most active banks providing access to investors for commodity trading. Along with Goldman Sachs and Deutsche Bank, Barclays offers index funds including agricultural commodities.
NECSI's research shows that speculation has directly caused food price peaks in 2007-08 and 2010-11, the first of which coincided with 60 food riots in 30 countries and the second with the Arab Spring.